What’s in a Name?

September 21, 1999

Well, it looks like Viacom finally gets it: the Internet isn’t a peripheral medium, and in time may prove to be ‘the’ medium for music entertainment. In May, Viacom acquired SonicNet, a popular, award-winning music news site. Then last month, Viacom formed MTV Interactive (MTVi), which will include MTV.com, VH1.com, and SonicNet.com. SonicNet attracted its core audience through comprehensive coverage of underground music, from British twee to the more obscure subspecies of electronic music. Now it’s “being positioned as the universal, or, if you like, umbrella brand,” says Nicholas Butterworth, longtime SonicNet impresario and the current CEO of MTVi. In other words, MTVi wants SonicNet to shave the goatee, and become all things to all listeners, a sort of online music emporium where jazz, classical, rock, and pop share equal bandwidth.

Butterworth has been a public figure since he took over the leadership of Rock the Vote in 1993. As SonicNet’s head he earned a well-
justified reputation for a prescient understanding of technology, savvy marketing skills, and an ability to forge fortuitous relationships with other Internet companies. In the wake of Viacom’s acquisition of CBS, Butterworth will head the Internet’s most powerful music force this side of the digital revolution. According to Media Metrix, the three sites pulled in over 3 million unique visitors in August. The new company will have its own offices on Astor Place with over 200 employees, and benefit from a promised $300 million in promotion over the next five years. The Voice spoke with Butterworth last week about digital downloads, the music industry consortium known as the Secure Digital Music Initiative (SDMI), and MTVi’s plans to become a one-stop shopping mall for the music-listening masses.

Jeff Howe: You’re 32. Wow. You’re so very much not much older than me. I don’t know how to deal with that, but I guess I’ll manage.

Nicholas Butterworth: Will that be in the Q&A? [Laughter] How old are you?

I’m 29. Oh, you’re just a kid.

So are you. . . . What will happen with the three sites? Is there any merit to the speculation back in May that SonicNet would be folded into MTV and VH1? Well, SonicNet as an organization is definitely being folded into MTVi. And, if anything, SonicNet’s entrepreneurial culture is having a very dramatic impact on the culture at MTVi. SonicNet’s being repositioned so that it will be an even stronger and broader offering. As the person who has been charged with developing and protecting the SonicNet brand for the last five years, I can honestly say that I think that MTVi is the best thing that ever happened to SonicNet.

What can MTVi do that MTV cannot? Well, MTVi is bringing together a tremendous amount of talent and resources to benefit both VH1 and MTV by delivering a great interactive experience produced by people whose mission is to create great, great online, um, experiences. I think the challenge for us is that we have to make sure that MTV and VH1 get more benefit from MTVi than they would from having their own in-house staff.

I know there was originally a fear at MTV of pushing viewers into a medium that didn’t have a real clear revenue model and pushing them away from the tremendously profitable model of the cable channel. As the mediums merge, will MTVi ever replace MTV? We are very focused on adding new experiences for users instead of simply replicating what’s on our channels. What we’re not doing is taking The Real World and simulcasting it on the Web. We’re not interested in taking share away from television.

Do you have plans to move into e-commerce? We think that MTVi has tremendous opportunities to participate in the transition of the entire music business to a digital economy. By Christmas, MTVi will offer secure music for sale over 100 percent of our Web sites. Because of our relationships with both the content owners and the distribution channels, as well as our direct access to the music audience through our TV promotion, we’re really in a great position to offer value in the chain. It’s also a question of helping artists reach their fans directly. The Internet’s a great place for people to buy tickets, a great place for artists to sell merchandise. We definitely plan to do a lot of work to develop those businesses.

At the time that Rolling Stone and CDNow inked a deal to swap their various roles, you said that “magazines don’t become retailers.” Do you see a concern in a site [like SonicNet] that has been known for its editorial content blurring lines with e-commerce? I think it’s a lot easier for broadcasters to add commerce to their online offerings than it is for print publications, if you’re asking specifically about magazines. I think SonicNet clearly wants to offer the best music experience, and we believe that in the future— and you can see this in a lot of places on the Web now— that integrating purchasing and content experiences will be important for music fans. A lot of different people will take different approaches to that initiative, but we think it’s critically important from a user’s standpoint.

And you don’t feel there’s a compromise involved in that? People don’t want to run all over the Internet to get their music experience. They want one powerful gateway that helps them listen to music, purchase music, access music. The only potential conflict is when you’re not clear about what’s editorial and what’s promotional. At SonicNet, we’ve built up a tremendous editorial reputation that we will protect at all times. As you probably know, our music news team has won numerous awards and is widely syndicated on the Internet. We pride ourselves as being hard-hitting journalists in the space.

What are your feelings about SDMI? My take on
SDMI is that it’s tremendously significant, and not so much for the rigor and depth of the specifications that were issued, because frankly there are a lot of blank areas that need to be filled in. But I view SDMI as the moment when the labels stopped treating the Internet like a threat, and started treating it like an opportunity. I’ve been the president of the Digital Media Association, which has worked with the RIAA [Recording Industry Association of America] on constructing a legal framework so that owners of copyright can get paid for performance rights in this medium. Sometimes that’s been adversarial; sometimes it’s been collegial. I do think that with the passage of the Digital Millennium Act, and then, almost more important, with the successes of SDMI, there’s been a sea change in the situation. We think that our interest as a content distributor and programmer are increasingly aligned with that of content owners. It all comes back to what’s best for the users. We
believe that MTV viewers and music fans want our sites to help them find new music and help them get music by the artist they love, and that’s what we want to help them do.

Let me ask one blunt question: are listeners going to save money through digital music? Will the savings of cutting the overhead be passed onto the consumer? I believe there are going to be new pricing models for music. So if you’re talking about whether you’re going to be able to buy a CD online for less than it retails, well, right now, the labels have taken the position that they want to sell a CD for the same price that they sell at retail. I think that the units that are sold online will differ from the units that are sold at retail. I don’t want this to be a singles business, but I think the album model is really based on physical media, and I really think there’s going to be either a compilation type of unit or there’ll be subscription programs. I mean, there’s going to be a lot of experimentation between now and then. You’re going to see the maxi singles and the eight-track tapes of the Internet come and go until we figure this out.

But I would think that given the immense cost of distribution, as well as the creation of the physical unit, that there would be a lot of savings. I would hope that if the consumers weren’t to get it, then the artists would. I’m sorry, but all I have to say about this is what I’ve said before: MTVi is not looking to impose standards on technology for music downloads, and we’re not trying to impose standards on pricing either.

SonicNet established its reputation as an alternative music site. Is it going to be difficult to maintain that “edginess,” that identity? Well, SonicNet is not going to be an edgy brand, first and foremost. SonicNet is a universal music brand. We’re going to promote our underground brand, Addicted to Noise, more in the future. But in terms of MTVi’s corporate culture, I do think there is a challenge to stay entrepreneurial, and focused on growth instead of size. I will tell you that I expect the new Viacom, with CBS in the fold, to be one of the most entrepreneurial and aggressive among large media companies. As big media companies go, we’ve got a terrific partner, but yeah, we have to stay very hungry. And we have to stay very paranoid. We have to work hard every day to add new value and to extend the experience beyond what we have in traditional media.

Nicholas, you have a history of social concern and political activism, and I’m curious how you can use your current position to serve those same ends. Well, it’s something our audience cares a lot about. Personally, I believe that mass media alone won’t create a better world, but I do believe that media can help disadvantaged communities find a voice. I think the Internet is an incredibly powerful tool for political expression and political organization across the political spectrum, and as a small-d democrat I’ve always been very excited and supportive about it. This is a company that’s always seen social concern as part of our mission and obligation to the audience.